Battle Over EPA's MACT Rule Rages Within the Obama Administration

On Monday, Michigan Attorney General Bill Schuette announced that he is leading a broad coalition of 25 states plus the US Territory of Guam in a court challenge to the EPA's MACT rule. That's the rule that has already shut down two power plants in Texas and threatens the broad reliability of electricity across the United States. The coalition, which includes states as diverse as Texas, Florida, Iowa, Colorado, Kansas, Louisiana, Nebraska, Tennessee, Virginia, and Utah, filed a 30-page amicus brief against EPA Administrator Lisa Jackson, sharply criticizing her agency for rushing to regulate, using shoddy methods and failing to consider the substantial harm that the MACT rule may do to the economy and to electric reliability. A coalition of governors, led by Utah Gov. Gary Herbert, has also fired off a letter to President Obama asking him to rein in the EPA. They issued that letter on Oct. 7; the president has yet to respond.

And now the battle has spread to within the Obama administration. The Federal Electric Reliability Commission is also questioning the EPA's MACT rule, according to a Wall Street Journal article out today:

At issue is the so-called utility rule that would impose new limits on mercury and other hazardous air pollutants. The regulation is the most costly in the EPA's history in return for marginal benefits. It was rushed out to force a large portion of the country's coal-fired power plants to shut down. On top of other such de facto anticarbon rules, this could compromise the reliability of the electric system if as much as 8% of generating capacity is subtracted from the grid.

The state of Texas suffered a heatwave this summer, and power usage nudged hard up against total capacity. The state's electric reliability commission estimated that had the MACT rule been in effect, Texans would have experienced blackouts that would have left them without the electricity necessary to power their homes and businesses.

The Federal Energy Regulatory Commission—which is charged with protecting reliability—admitted as much last year in a preliminary analysis, only to withdraw the document and refuse to update it. But now one of FERC's five commissioners is calling out his own boss for this abdication.

In a recent letter to Alaska Senator Lisa Murkowski, who has been probing FERC, Commissioner Phillip Moeller admits, "I can't affirm that EPA actions will not materially degrade reliability, nor can I speak for the entire Commission and how it will carry out its statutory obligations." He added that FERC "should be involved in the rulemaking process of a federal agency if such involvement helps reduce threats to reliability."

That's precisely what FERC Chairman Jon Wellinghoff is refusing to do, perhaps as a favor to his political patron Harry Reid. The Chairman has broad powers over FERC's work, much like a CEO, even if other commissioners dissent. The technical experts in the reliability office itself are also worried, as internal documents show. Mr. Moeller has repeatedly said he is "fuel neutral" but that as a Commissioner, "I cannot be neutral on the subject of reliability," as he put it at a September hearing.

Mr. Moeller also dismisses Mr. Wellinghoff's endorsement of a "safety valve" that would give FERC the power to overrule the EPA if it thinks its rules might lead to blackouts—but only after the fact. "I do not know what exemption process would work best for administering what may become a complex task of determining which set of power plants will need to operate for reliability purposes," Mr. Moeller writes. In other words, no regulator has the omniscience to decide which plants are "must run" and therefore deserving of a safety-valve exemption. The only way we'll know is after there's a disaster.

These two agencies, the EPA and FERC, may now be working at cross-purposes. One wants to push through a massive new set of regulations in haste, while the other has the job of protecting our power grid. It will take a leader to sort them out, but all we have is President Obama at the moment, and his silence bequeaths favor to the regulator. If he doesn't stop the EPA, the regulation will take effect, and job losses and even power outages will follow. Energy prices will increase. The Texas hot summer is over, but winter is on the way. That's among the reasons that Michigan is leading the fight to stop the MACT rule in its tracks.